Nasdaq OMX Blazed Datacenter Hosting Trail 10 Years Ago

Ten years ago Nasdaq OMX moved its matching engines and corporate technology to a Verizon datacenter. The decision turned heads in the financial services world. Today, the practice of utilizing third-party datacenter services is becoming commonplace.

Ten years ago it was considered blasphemy for any company operating in the financial services space to move its primary mission critical systems to a third-party datacenter provider. Only in recent years have financial services companies started to embrace the idea of utilizing datacenter hosting providers.

Yet, a decade ago, Nasdaq OMX made the bold move to move almost all of its corporate systems, as well as its core market engines to a facility run by Verizon in Carteret, New Jersey. "We had run our own datacenters for many years, but we made the decision to abandon a ‘build-up’ approach 10 years ago," says Stacie Swanstrom, SVP and Head of Access Services at Nasdaq OMX. "We realized running a datacenter is not our core competence and that it is a separate business in itself." According to Swanstrom, Nasdaq made the decision to focus on its primary business — running financial markets and surrounding access services— and let experts who run datacenters for a living manage Nasdaq OMX's needs. "We gain operational efficiency and lower costs for our customers by letting our technology be run by a third party who spends all of their time maintaining the datacenter." (Swanstrom will be speaking about Nasdaq OMX's datacenter strategy at Interop 2014).

Nasdaq runs its matching engines for its eight major markets, most of its corporate systems and cloud offerings such as FinQloud in a Verizon facility, Swamstrom reports. "Over the years, we have expanded our presence in the Verizon facility and we have opened up new spaces there according to demand," she says. " That is one of the advantages of working with Verizon. We can expand or contract while inside their datacenter" as Nasdaq's needs change. In contrast, if Nasdaq ran its own datacenters, its computing needs would be fixed, in terms of space and computing power, Swanstrom continues.

However, working with a third-party datacenter provider could potentially slow the release of new technology. "When you own the facility you need to be willing to take on the overhead" costs, Swamstrom says. An important element to having a partner run your datacenter is that new technology ideas need to be installed in cooperation over time. "For instance, if we come up with an idea for a new radical way to do cooling or power, we have to install it with our third party partner.” Swanstrom is quick to note that Verizon has been very accommodating ever since Nasdaq moved to Carteret and "they have worked with us quickly on new ideas."

For instance, in 2012 Nasdaq rolled out Super Cab, a cabinet that could handle 17 kilowatts of power. At the time of the release, the highest kilowatt cabinet was 10 kilowatts. Nasdaq's Super Cab used a special design that draws the hot equipment exhaust into a custom cabinet chimney to help with power and cooling. Nasdaq worked closely with Verizon to get the cabinet to market quickly. "We leveraged technology partners to build it and we worked closely with Verizon on it," Swanstrom says.

Verizon has also allowed a great deal of flexibility for Nasdaq and its financial services partners. "We have 17 telco vendors that come in and provide connectivity for our clients," Swanstrom notes. "Not very many datacenter providers would allow that many telcos to come into their facility."

Even with the good experience with Verizon, Nasdaq OMX continues to evaluate its options every year. "There is very little chance of Nasdaq OMX getting back into datacenter services business," Swanstrom says. "We will be with a [datacenter] provider" in the future. "It is hard to say which provider. We are always looking at what is best for us and for our clients. We are committed to Verizon, but we always continue to evaluate" Nasdaq OMX's contracts and relationships with third-party providers, she adds.

"In three to five years, the technology will be more efficient, and smaller," Swanstrom concludes, noting that space and power needs will likely change as well. "But we are expanding to more market and more services, so [Nasdaq OMX's datacenter footprint] might look very similar."

In hindsight, Nasdaq OMX's move to a Verizon facility was ahead of its time. Today, more financial services firms, including a number of other exchanges, are looking to datacenter services vendors to help expand or replace existing computing needs.
Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio